Telecom/1996-04-telecom-walnutcreek.iso/security-fraud/atm-bank.fraud

Text File | 1991-09-02 | 25KB | 586 lines

Date: 2 Sep 91 11:04:00 CDT
From: JOHN WINSLADE <[e-mail]>
Subject: ATM - Bank Fraud

>From the February 12, 1989 {Omaha World-Herald}

"Bank to Reissue 7,700 ATM Cards"

Los Angeles - Bank of America has sent letters to more than 7,000
customers of its automated teller machine system, explaining that
they will receive new cards as a result of an aborted scheme to
steal up to $14 million from the bank's machines around the country.

An elaborate scheme to use more than 7,700 counterfeit cards to
obtain cash from the bank's Versatel ATM network was disrupted last
weekend by U.S. Secret Service agents who had spent the past month
working with an informant, according to court documents.

Four Los Angeles-area residents, including an employee of a
computer programming company who is accused of masterminding the
scheme, and a Lincoln, Neb., man were arrested and charged with
violating federal fraud statutes.

The people charged were identified as Mark and Jackie Koenig, a
husband and wife; Koenig's brother Scott, who lives in Lincoln;
Mrs. Koenig's sister, Bobbie Jo Bobby; and a friend of the group,
Robert Hussey.

Seized in the raid were 1,884 completed counterfeit cards, 4,900
partially completed cards and a machine to encode the cards with
Bank of America account information, including highly secret personal
identification numbers for customers, according to court documents.

The group planned to fan out across the country to use the cards
for six days before and during the long President's Day weekend,
according to the charges.  The holiday weekend was intended to
provide more time to accomplish the task.

"We estimate right now that the loss, had they been permitted to go
forward, would have been between $7 million and $14 million," said
Carolyn J. Kubota, the assistant U.S. attorney handling the case.

ATM fraud is a growing problem for financial institutions.  Over
the Veteran's Day weekend last October, Security Pacific National Bank
in Los Angeles lost nearly $350,000 from 300 customer accounts through
its ATM network.  The crime remains unsolved.

Customers do not lose money from this type of fraud because they
are reimbursed for any charges to their accounts.

In the Bank of America case, the alleged scheme was stopped before
a significant amount of money was stolen.  Court records stated that
three "test" cards had been used successfully, but only a small
amount of money was taken in the tests.

Mark Koenig worked as a computer programmer for Applied
Communications Inc. of Omaha.

He was temporarily working under contract for a subsidiary of GTE
Corp. that handles the telecommunications company's 286 ATM
machines at supermarkets and stores in California.

According to the Edwards affidavit, an Omaha friend of Mrs. Koenig
came to the Secret Service last month and said she had been asked
to participate in the scheme.

The woman, who was not identified, agreed to cooperate with the
government and wore a concealed tape recorder to a meeting at the
Koenig's apartment Jan. 27th.
*****************************************************************
***

The following article accompanied the above information:

"ACI Security Is Intact, Official Says"

A scheme to misuse automatic teller machines did not violate any
security systems or endanger any funds held by banks that use
systems produced by Applied Communications Inc., an Omaha-based
division of U.S. West Inc., an ACI officer said Saturday.

"It's not a breach of our security system," said Ray Croghan,
president of ACI.  "It's something that anyone who had access to
that data could have constructed.  It didn't require any specialized
knowledge of a computer to accomplish what he did."

Croghan was referring to an alleged plan by a group of people,
headed by a Los Angeles man who worked for ACI, to steal up to
$14 million from Bank of America automatic teller machines around
the country.

In an interview, ACI President Croghan said Koenig apparently used
a personal computer at home to develop the scheme, using ATM card
numbers and personal code numbers he knew because of his duties
while working on assignment for a subsidiary of GTE Corp.

"None of our systems are at risk," Croghan said.  "Their plan was
to jackpot the ATM's over the President's Day holiday."

He said senior technical people at every financial institution that
uses ATM systems have access to similar numbers.  The knowledge is
necessary to maintain and operate the ATM system, he said.

"Our immediate concern is to make sure we work with our customer
(Bank of America) to protect the integrity of their system,"
Croghan said.
*********************************************************************


Date: 2 Sep 91 11:04:00 CDT
From: JOHN WINSLADE <[e-mail]>

>From the February 19, 1989 {Omaha World-Herald}

"Fraud Plot Allegations Stun Some"
  "Ex-Omahans Indicted in Bank-Card Scheme"
By: David Thompson

Mark and Jacklyn Koenig appeared to be a "nice, clean-cut young
couple" while they lived in a Sarpy County condominium, according to
friends and former associates, who said they were shocked about the
Koenig's alleged involvement in a massive bank fraud scheme centered
in California.

The Koenigs were among five people indicted last Friday in Los
Angeles in allegedly participating in a scheme to produce about 7,700
counterfeit automatic bank teller cards.

Authorities contend that the five planned to use the cards this
President's Day holiday weekend to steal money from Bank of America
by withdrawing funds from automatic teller machines in Lincoln, San
Diego, San Francisco and Sacramento.

Monday is President's Day, a federal holiday, and most banks and
savings and loans will be closed.

Indicted with Koenig, 28, and his 33-year-old wife, both now of
Ladera Heights, Calif., were Scott K. Koenig, 26, of Lincoln; and
former Omahans Bobbie Jo Bobby, 20, of Ladera Heights, and Robert G.
Hussey, 29, now living in Marina del Ray, Calif. Scott Koenig is
Mark's brother.  Miss Bobby is Mrs. Koenig's sister.

All five are charged with conspiracy to produce and use counterfeit
access devices.  All but Scott Koenig are charged with additional
counts of producing or using the cards or possessing equipment to
make them.

All are free on bail except Mark Koenig, who has not posted his
$100,000 bail.

Secret Service agents learned of the plot from an informant,
officials said.  They said it was the largest such scheme ever
uncovered in the nation.

"The losses could have been staggering - $14 million or more," said
Kirby Hutchison, agent in charge of the U.S. Secret Service office
for Nebraska and Iowa.

The group had already tested the cards at several teller machines in
Nebraska and California and obtained about $5,000, Hutchison said.

Mark Koenig was described by friends as a computer wizard.

He designed a program that enabled people who conduct triathlons - an
athletic event that combines swimming, bicycling and running - to
rank participants by their performances based on age, sex and other
categories, said Todd Samland of Omaha.

Samland, who stages triathlons, was swimming coach for the Koenigs
while they lived in the Omaha area.  Samland said both Koenigs were
active in triathlons.

"Jackie was the more successful triathlete of the two," he said.
"She was into the training part, and she was a very good
middle-endurance person - a one-mile swim, 20 to 25 mile bike ride
and a six-mile run."

"Mark was gadget-conscious.  He was always talking about how he could
adapt something that would help him in a race."

Charges this month against the Koenigs and the indictments Friday
"caught us all by surprise," Samland said.

Chris Blumkin, a spokeswoman for Koenig's former employer in Omaha,
Applied Communications Inc., said Koenig came to the firm "highly
recommended."

"He had a security clearance from the U.S. Department of Defense, so
he had been pretty thoroughly investigated," she said.  "He was a
good employee."

She said Koenig worked for ACI from fall 1985 until Feb. 6 of this
year, when the company was notified of his arrest.

He was assigned to ACI's technical consulting division and sometimes
was sent to other cities and other countries under contract with
companies that needed computer services, she said.

Mrs. Koenig reportedly worked in computer sales, although that could
not be verified.

The Koenigs moved to Omaha from Lincoln in 1984.  They remained here
until early 1988, when ACI assigned Koenig to London for two months.
Mrs. Koenig moved to Los Angeles, and when Koenig completed his work
in London, he joined her.

He continued to work for ACI under contract and was assigned to GTEL,
a Long Beach, Calif., subsidiary of GTE Corp when he was arrested.

When they moved to Omaha, the Koenigs lived for less than a year at
3380 South 127th Ave.  In 1985, they bought a condominium in the
Meadows subdivision in Sarpy County.

"They were nice people, pretty sharp too," said LaVance Bennett, who
lived next to their unit at 8707 Meadows Parkway, south of Millard
near the intersection of Highway 50 and Giles Road.

"I was impressed with them, although we didn't get to know each other
real well.  They did come over once when they locked themselves out
and had to call a locksmith.  I'm really surprised at what happened
with them."

Leo Krauth, who was president of the Meadows homeowners association
when the Koenigs moved in, called them "real clean-cut, very friendly
people."

"They were both hard workers and put in some long hours, it seemed,"
Krauth said.  "But they liked their jobs."

The Koenigs occasionally had partied but were never boisterous or
rowdy, Krauth said another neighbor told him.

The Koenigs bought the three-bedroom condo for $60,000 in August 1985
from Hussey, another of those indicted.  After selling to the Koenigs
Hussey moved to another condominium in central Omaha, according to
Douglas County records.

The Koenigs still own the condominium, which is rented out, Krauth
said.

An acquaintance described the Koenigs as "the perfect yuppie couple."

They met while students at the University of Nebraska-Lincoln.  It
was not clear when they married.

Koenig enrolled at UNL in September 1977.  He was enrolled un the
Engineering College until December 1980, when he left without getting
a degree.

"People who worked with him said he was learning more on his own,"
Samland said.

Jacklyn Bobby enrolled in graduate school at UNL in the spring
semester of 1980 and continued her studies through spring 1981.  She
left without a degree, according to university records.

She had received a degree in medical technology in 1977 from Northern
State College at Aberdeen, S.D.

After Koenig left school, he worked as a computer operator for a
Lincoln bank and later was employed by a computer services company in
Lincoln before moving to Omaha.

Court documents allege he was the key man in the bank fraud scheme.

While working for the GTE subsidiary in Los Angeles, Koenig allegedly
obtained account numbers and security codes for about 7,700
customers, according to the indictment filed in U.S. District Court
in Los Angeles.

U.S. Attorney Robert C. Bonner said at a Los Angeles press conference
Friday that Mark Koenig also stole an encoder machine from the
company and had encoded information on 1,500 counterfeit ATM cards,
the {Los Angeles Times} reported.

The indictment said that in the scheme, Koenig was to remain in Los
Angeles while the others went to other cities to use the cards.

The group intended to don disguises to make the withdrawals "because
some ATM machines have cameras," said Richard J. Griffin, head of the
Secret Service in Los Angeles, the Times reported.

The scheme was interrupted two weeks ago by investigators who found
them manufacturing the cards at the Koenig's apartment.  A sixth
person, a friend of Mrs. Koenig's whom investigators have declined to
identify, had been asked to participate but instead went to
authorities.

She agreed to cooperate with Secret Service agents and wore a tape
recorder to a meeting at the Koenigs' suburban Los Angeles apartment
Jan. 27, according to court documents.

Bonner said Koenig's scheme was "extraordinarily sophisticated."  He
said Koenig was able to transfer the necessary codes onto magnetic
tapes, which were affixed to pieces of poster board about as thick as
a bank transfer card.

According to United Press International, when Secret Service agents,
police and sheriff's deputies raided the Koenig's apartment, they
found 1,484 completed cards, 6,100 partly finished cards and encoding
devices.

If the scheme had worked, Bank of America customers probably would
not have lost any money because in cases of ATM fraud, bank
customarily absorb the losses and reimburse customers.

Griffin, of the Secret Service, said the conspirators had targeted
only Bank of America accounts in a apparent attempt to make it look
like an "inside job," thereby throwing off investigator, the Times
reported.


>From the October 15, 1989 {Omaha World-Herald}

"Nurse Turns Informant To Thwart Bank Fraud"
By David Thompson

Sally Vilmont's adventure into the world of counterfeiting as a
"wired" government informant began with a January telephone call
from an acquaintance in Los Angeles who asked Ms. Vilmont if she
would like to make $1 million in one weekend.

"My first reaction was, `I don't want to go to jail,'" said Ms.
Vilmont.

But the caller, Jacklyn Bobby, assured her that wouldn't happen
because her husband, Mark Koenig, had perfected a scheme to
counterfeit and use automatic bank teller cards to raid Bank of
America machines.

"At first blush, it was astounding," said Ms. Vilmont, a
45-year-old Ralston nurse and administrator of a nursing business
who was Nebraska's first entry in the 1979 Mrs. America contest.

But instead of taking part in the fraud, Ms. Vilmont - whose father
is a retired deputy sheriff - agreed to help Secret Service agents
collect incriminating information that helped lead to the capture
and convictions of the five participants.

She talked with a reporter last week, revealing for the first time
her role in unraveling the scheme.  She waited to talk until after
those charged were sentenced.

The scheme was stymied in February, when armed Secret Service
agents raided a Los Angeles apartment and found more than 3,500
counterfeit ATM cards being manufactured and 1,400 others already
completed.

The group planned to fan out along the West Coast during a holiday
weekend and use the cards in hundreds of teller machines to collect
millions of dollars.

Ms. Vilmont said she did not give Jacklyn Bobby an answer before
she hung up last January.

"You look at your kids, your life, what you would be doing.  I just
put the whole situation out of my mind."

Three days later, Ms. Vilmont received another call from Ms. Bobby,
again inviting her to take part in the scheme.

Still, she gave no answer.

"I hung up the phone and began thinking about it," Ms. Vilmont
said. "They just made me an accessory to a felony.  I could have
tried to talk them out of it, but the way they were talking, I
thought there was a 99 percent chance they would go ahead anyway."

Ms. Vilmont said she talked to a friend, and he contacted the FBI.
The next day, federal agents visited her home.

Because it involved use of bank cards, the case was referred to the
Secret Service.  Ms. Vilmont went to that agency's downtown office
and discussed it with investigators.

While there, she made several telephone calls to California.  "I
think they were testing me and trying to get more information,
too." she said.

Ms. Vilmont made arrangements to go to California, accompanied by
a Secret Service agent she called "Joe."  To explain his presence,
Ms. Vilmont, a divorcee, said she told Ms. Bobby that she had met "a
great guy" recently when she went to visit her son, Sean, a sailor
stationed in Orlando, Fla.

She and the agent flew to Los Angeles late in January.  They met
for a day with agents and a federal prosecutor in Los Angeles to
discuss plans.  Then she went to the apartment of Koenig and his wife.

Agents had fitted Ms. Vilmont with a battery-powered microphone,
which she wore under her blouse.  To pick up the conversation,
agents placed a receiver and recorder in a van and parked nearby, she
said.

"I went in and Mark was sitting in a chair at his computer terminal,"
Ms. Vilmont said.  "I asked him what he was doing, and he literally
talked right into the microphone.  I looked out the window because
I expected the sound truck to be rocking."

Koenig, 29, explained that he had obtained bank card numbers of
Bank of America customers, along with the four-digit security codes.
He had stored the numbers in his personal computer, she said.

On weekends he sneaked an encoder device out of his employer's
office to transfer bank card numbers to magnetic tape.  The tape was
glued to pieces of white poster board that was cut to the size of bank
cards, Ms. Vilmont said.

Koenig, described by friends as a computer wizard, worked for
Applied Communications Inc. of Omaha.  Early in 1988 he was sent on
assignment to London for two months and then was transferred to Los
Angeles under contract with Bank of America to work on a
communications system involving automatic teller machines.

Federal prosecutors called him the leader of the counterfeit ring.
Other participants were Koenig's 34-year-old wife, Jacklyn; Robert
Hussey, 30, a former Air Force captain once stationed at Offutt Air
Force Base; Ms. Bobby's sister, Bobbie Jo Bobby, 21; and Koenig's
brother, Scott, 26, of Lincoln.

Ms. Vilmont said she met Hussey while he was teaching a personal
finance course at Bellevue College in 1984, and she met the others
in the group through Hussey.

Koenig, known as "High Tech" to his friends, told her that the
group had already successfully tested the counterfeit.

"I asked Mark how many numbers he had, and he said, `7,720,'" Ms.
Vilmont said.

He told her that on the Presidents Day holiday weekend, Feb 17-20,
the group would fan out with the cards, put on disguises and use
the cards at as many machines as they could find, withdrawing the limit
of $300 each.

They planned to drop some cards near the machines, hoping that
others would see them, figure that the four digits penciled on each card
was the security code, then use them, Ms. Vilmont said.  That was
intended to confuse and delay investigators, she said.

They picked the holiday weekend because banks would be closed, and
they thought they could hit more machines and go longer without
being discovered, she said.

Koenig wanted her to go to St. Louis and use the cards there.

"He already had more than 1,000 cards made and cataloged when I got
there," she said.

Ms. Vilmont said she was put to work cutting the magnetic tape for
the cards.

During the afternoon, they talked about the scheme.  "One thing
they hadn't figured out was what to do with all the $20 dollar bills,"
she said.  "I told them it would be best to buy gold bars, and they
thought that was a pretty good idea."

Later that day, the group decided to test some of the cards they
had made.

"I told them I would drive," she said.  "The agents had rented a
car for me, and they told me, `If you go anyplace, take the Cadillac.'

"They had put a gadget on it so they could follow me.  I drove
slow, and I kept looking in the rear view mirror to see that they were
following me.  I didn't know it then, but there were agents in a
car ahead of me and there were others on either side.  Mark asked me
why I was going so slow - I have a sports car and usually don't drive
that way.  I told him I was new in California and didn't want to go
too fast."

They drove until they spotted several bank machines that did not
have cameras.  "It was a bright, sunny day, and they didn't have their
disguises with them," she explained.

The counterfeit cards worked, and the group walked away with
several hundred dollars, she said.

They returned to the Koenig's apartment, and a short time later she
excused herself, saying that she had to meet her friend.  "The
battery pack on the microphone was good for four hours, and I
didn't want to stay longer than that.

She made plans to return the next weekend, Ms. Vilmont said.

"We had a couple scary times on that second trip," she said.

"These people were all triathletes (swimming, bicycling and
running), and at one point when we were in the apartment, they all
starting standing up and stretching.  They then started wrestling,
and here I am wearing that microphone.  I slumped down in my seat and
acted like I didn't want any part of what they were doing, and they
left me alone."

Ms. Vilmont said she learned later that when agents began hearing
the scuffling, they got out of their cars and started towards the
apartment, thinking she would be discovered as an informant.

They pulled back after agents in the van said she was not being
harmed.

She met with agents later in the day, and it was decided that they
would raid the apartment shortly after she returned.  They told her
they would arrest her with the others, then take the others in
separate cars to a federal building for questioning.

"There was a security system in the apartment building, and people
living there had to press a buzzer so you could get in," she said.

"They told me that when I went back, I should leave my purse in the
car, then tell them about 10 minutes later that I forgot it.  When
I went out the door, I was to let the agents in.  Then when I came
back from the car, they were to arrest me, hustle me up the stairs,
rush into the apartment and arrest the others."

She said she had been calm during most of the time with the Koenigs
and others, but when she returned, she became exceedingly nervous.

"My voice started shaking, my knees started shaking.  I couldn't
think straight.  After about three minutes I went into the bathroom
and said into my microphone, `I'm losing it.'"

She told the others she had left her purse in the car, but when got
to the outside door, there were no agents around.

"Then all at once there were all these guys running towards me,"
she said.  "They carried shotguns, all kinds of weapons.  If the
neighbors had looked out their windows, they would have thought it
was a terrorist attack.  There were 18 altogether."

"I went out and got my purse, and when I came back in "Joe" cuffed
me, then took me up the stairs to the apartment.  The agents went
into the apartment and I just shut my eyes.  I didn't want to
remember it at all."

"Then they put me in the car.  I just sat and shook like crazy.  I
rarely lose control - I ran an intensive care unit 13 years - but
this time I did."

Ms. Vilmont said she was reluctant to go to the federal building,
but agents told her she should.  "I was still shaking, but I was glad
I went, because we sat and talked alot."

Kirby Hutchison, agent in charge of the Secret Service office for
Nebraska and Iowa headquartered in Omaha, declined comment on the
case.

In February, after participants in the scheme were arrested,
Hutchison told a reporter that "it was a pretty sophisticated
operation."  He said at the time that the losses could have been
"staggering, $14 million or more."

The five people involved were sentenced Sept. 29 to prison terms
ranging from 18 to 41 months for conspiracy and bank fraud charges.

After she returned to Omaha the day after the arrests, Ms. Vilmont
called her father in Rockford, Ill., and told him about her
experiences.  She also told her son, Kevin, a high school junior.

Since then, she said, she has experienced many emotions about
taking part in the case.

"When they asked me to take part in what they were doing, I felt
insulted, very insulted, that they thought I would do something
like that," she said.

There is also a twinge of sadness.

"They were all smart, clean-cut, nice people.  They didn't party
loud, didn't do a lot of drinking.  They just got off the track.
They got all caught up in condos and cars and clothes and jewelry.
They rationalized by saying that they were not stealing from
people. They said they were taking from the bank."

And, she said, she was not happy about what she had done.  "I was
mad (at myself)," she said.

Then she heard a Creighton University ethics professor tell an
audience that, although a person makes the right decision, he or
she might not feel good about it.

"That was just the right thing for me to hear."